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Chapter2 - Managing People
Chapter2 - Managing People
● Business model
● Business model innovation
● Competitive advantage
● Core competencies
● Horizontal integration
● Management
● Resource-based view
● Strategic capability
● Strategic fit
● Strategic management
● Strategy
● Vertical integration
l E a r N i N g O u TCOM E s
On completing this chapter you should be able to define these key
concepts. You should also understand:
Introduction
Management is essentially about managing people. But, as covered in this
chapter, managers are also responsible for generally controlling the business
Management defined
Management is the process of making things happen. Managers define goals,
determine and obtain the resources required to achieve the goals, allocate
those resources to opportunities and planned activities and ensure that those
activities take place as planned in order to achieve predetermined objec-
tives. Management can be described as getting things done through people
by exercising leadership. This definition emphasizes the importance of the
leadership role but it should be remembered that managers are also there to
make effective use of the other resources available to them.
Purpose of management
The purpose of management is to satisfy a range of stakeholders. In the pri-
vate sector, this means making a profit and creating value for shareholders,
and producing and delivering valued products and services at a reasonable
cost for customers. In the public sector, management is there to ensure that
the services the community requires are delivered effectively. In the volun-
tary sector, management sees that the purposes of the charity are achieved
and also keeps the faith of the community and donors. In all sectors man-
agement is about exercising social responsibility and providing rewarding
employment and development opportunities for employees.
Strategic management
Strategic management is an approach to management which involves taking
a broad and longer-term view of where the business or part of the business is
going and managing activities in ways which ensure that this strategic thrust is
maintained. Boxall and Purcell (2003: 44) explained that: ‘Strategic manage-
ment is best defined as a process. It is a process of strategy making, of form-
ing and, if the firm survives, reforming its strategy over time.’ The purpose of
strategic management was expressed by Rosabeth Moss Kanter (1984: 288) as
being to ‘elicit the present actions for the future’ and become ‘action vehicles –
integrating and institutionalizing mechanisms for change’ (ibid: 301).
The key strategic management activity as identified by Thompson and
Strickland (1996: 3) is ‘deciding what business the company will be in and
forming a strategic vision of where the organization needs to be headed – in
effect, infusing the organization with a sense of purpose, providing long-
term direction, and establishing a clear mission to be accomplished’.
The focus is on identifying the organization’s mission and strategies, but
attention is also given to the resource base required to make it succeed. Stra-
tegic management involves the development and implementation of strategy
(business, HRM and L&D) as described below. It also includes the impor-
tant activity of business model innovation, which identifies opportunities to
increase the competitiveness and prosperity of the business through a review
of all the elements of its business model (a picture of an organization which
explains how it achieves competitive advantage and makes money).
Strategic management involves the formulation of strategy and it has
to take account of the concepts of core competences or capabilities, the
resource-based view, strategic fit and strategic capability.
Strategy
Strategy is a declaration of intent which sets out the approach selected to
achieve defined goals in the future. It was defined by Thompson and Strickland
(1996: 20) as: ‘The pattern of actions managers employ to achieve organi-
zational objectives.’
Strategy is forward looking. It is about deciding where you want to go
and how you mean to get there. It is concerned with both ends and means.
It states: ‘This is what we want to do and this is how we intend to do it.’
Strategies define longer-term goals but they also cover how those goals will
be attained (strategic planning). They guide purposeful action to deliver the
required result.
But strategy formulation is not such a deterministic, rational and con-
tinuous process as is often supposed. Sparrow et al (2010: 4) asserted suc-
cinctly that: ‘Strategy is not rational and never has been.’ It has been said
(Bower, 1982: 631) that ‘strategy is everything not well defined or under-
stood’. This may be going too far, but in reality, strategy formulation can
best be described as ‘problem solving in unstructured situations’ (Digman,
1990: 53) and strategies will always be formed under conditions of partial
ignorance. Quinn (1980: 9) pointed out that a strategy may simply be ‘a
widely held understanding resulting from a stream of decisions’. He believed
that strategy formulation takes place by means of ‘logical incrementalism’,
ie it evolves in several steps rather than being conceived as a whole.
Mintzberg (1987) argued that in theory strategy is a systematic process:
first we think, then we act: we formulate, then we implement. But we also
act in order to think. In practice, ‘a realized strategy can emerge in response
to an evolving situation’ and the strategic planner is often ‘a pattern organ-
izer, a learner if you like, who manages a process in which strategies and
visions can emerge as well as be deliberately conceived’ (ibid: 68). This con-
cept of ‘emergent strategy’ conveys the essence of how in practice organiza-
tions develop their business and HR strategies.
Strategic fit
Strategic fit is a way of achieving competitive advantage which means at-
taining and sustaining better results than business rivals, thus placing the
firm in a strong competitive position. The focus is upon the organization
and the world around it. To maximize competitive advantage a firm must
match its capabilities and resources to the opportunities available in the
external environment. As Hofer and Schendel (1986: 4) concluded:
A critical aspect of top management’s work today involves matching
organizational competences (internal resources and skills) with the opportunities
and risks created by environmental change in ways that will be both effective
and efficient over the time such resources will be deployed.
Strategic capability
Strategic capability refers to the ability of an organization to develop and
implement strategies which will achieve sustained competitive advantage. It
is therefore about the capacity to select the most appropriate vision, to de-
fine realistic intentions, to match resources to opportunities and to prepare
and implement strategic plans.
The strategic capability of an organization depends on the strategic capa-
bilities of its managers. People who display high levels of strategic capabil-
ity know where they are going and know how they are going to get there.
K e y l e a r n i n g po i nt s
Management
Management is the process of making things happen. Managers define goals, determine
and obtain the resources required to achieve the goals, allocate those resources to
opportunities and planned activities and ensure that those activities take place as
planned in order to achieve predetermined objectives.
The purpose of management is to satisfy a range of stakeholders.
Strategic management
Strategic management is an approach to management which involves taking a broad and
longer-term view of where the business or part of the business is going and managing
activities in ways which ensure that this strategic thrust is maintained.
Strategy
Strategies define longer-term goals but they also cover how those goals will be attained
(strategic planning). They guide purposeful action to deliver the required result.
Strategy formulation is not necessarily a deterministic, rational and continuous
process.
Core competencies
Core competencies or distinctive capabilities describe what the organization is specially
or uniquely capable of doing.
Strategic fit
To maximize competitive advantage, a firm must match its capabilities and resources to
the opportunities available in the external environment.
Strategic capability
The ability of an organization to develop and implement strategies which will achieve
sustained competitive advantage.
References
Barney, J (1991) Firm resources and sustained competitive advantage, Journal of
Management Studies, 17 (1), pp 99–120
Bennis, W (1989) On Becoming a Leader, New York, Addison Wesley
Birkinshaw, J (2010) An experiment in reinvention, People Management, 15 July,
pp 22–24
Bower, J L (1982) Business policy in the 1980s, Academy of Management Review,
7 (4), pp 630–38
Boxall, P F (1996) The strategic HRM debate and the resource-based view of the
firm, Human Resource Management Journal, 6 (3), pp 59–75
Boxall, P F and Purcell, J (2003) Strategy and Human Resource Management,
Basingstoke, Palgrave Macmillan
Digman, L A (1990) Strategic Management – concepts, decisions, cases,
Georgetown, Ontario, Irwin
Drucker, P (1955) The Practice of Management, London, Heinemann
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Englewood Cliffs NJ, Prentice Hall
Hofer, C W and Schendel, D (1986) Strategy Formulation: Analytical Concepts,
New York, West Publishing
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Kanter, R M (1984) The Change Masters, London, Allen & Unwin
Kotter, J P (1991) Power, dependence and effective management, in J Gabarro (ed)
Managing People and Organizations, Boston MA, Harvard Business School
Publications
Mintzberg, H (1987) Crafting strategy, Harvard Business Review, July–August,
pp 66–74
Mintzberg, H (2004) Enough leadership, Harvard Business Review, November,
p 22
Penrose, E (1959) The Theory of the Growth of the Firm, Oxford, Blackwell
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Harvard Business Review, May–June, pp 79–93
Questions
1 How would you define management?
2 What is the purpose of management?
3 What is strategic management?
4 What is strategy?
5 How would you describe the process of strategy formulation?
6 What is a business model?
7 What is business model innovation?
8 What is a core competency?
9 What is the resource-based view?
10 What are the meaning and significance of strategic fit?
11 What is strategic capability?
12 What is the difference between management and leadership?